POLITICO Pro: House to take up tax extenders in April

For Immediate Release:

March 24, 2014

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By Kelsey Snell

Ways and Means Committee Chairman Dave Camp told panel members on Monday that he will hold hearings on the hodgepodge of tax provisions known as extenders, tax breaks worth tens of billions of dollars annually.

“Beginning in April, the committee will continue its work by going policy by policy to determine which extenders should be made permanent,” Camp (R-Mich.) wrote in a memo. “That process will include both hearings and markups. Specific dates and topics will be forthcoming.”

With a major tax bill unlikely to come to fruition this year, all eyes are on a group of tax breaks that expired on Jan. 1, which typically include the research and development credit prized by tech and pharmaceutical companies but also tax relief for homeowners, commuters and teachers. Many Republicans want to scrap breaks related to renewable energy.

The April timeline means that House lawmakers will consider the tax breaks at about the same time as Senate Finance Committee Chairman Ron Wyden (D-Ore.), who is expected to take up the provisions in April.

Camp weighed in on the treatment of some of the benefits in the 1,000-page draft tax code overhaul legislation he proposed last month.

Among the biggest breaks is one used by corporations including the financing arm of General Electric for so-called active financing income, with a cost of several billion dollars a year.

Some Democrats and liberal consumer groups say this provision helps companies skirt rules on taxing certain foreign income immediately. Taxes on most offshore profits can be deferred indefinitely and this provision extends deferral to certain types of financing.

For example, a much-criticized provision that benefits NASCAR racetracks — giving them a seven-year write off period — is overridden. One that benefits Puerto Rico and the Virgin Islands through an excise tax on rum is left out of the draft completely.

The draft also does not address a provision intended to help fund development in blighted areas. Used by banks, among others, the New Markets Tax Credit costs about $5 billion over five years, according to a recent estimate by the Joint Committee on Taxation. It provides credits for equity investments in areas designated as “Community Development Entities.”

He does, however, make permanent a three-year depreciation schedule for racehorses 2 years old and younger that has strong support from Senate Minority Leader Mitch McConnell. The Kentucky Republican fought to keep the break in the 2008 farm bill. Camp’s bill extends the provision to cover all racehorses, regardless of age.

A key part of any extenders discussion is whether Congress will pay for the cost of reinstating the breaks.

The breaks and benefits are often bundled as a package and attached to other big-ticket bills, like the fiscal cliff deal that prevented most of the Bush-era individual tax cuts from expiring. As of now there is no clear vehicle to help defray the cost.

House Democratic Whip Steny Hoyer (D-Md.) in an unrelated speech on Monday said the breaks should be paid for.

“If we can use the tax extenders process to promote the benefits of comprehensive reform, including making our long-term outlook more sustainable, it would be an important victory compared to recent history. Failure to offset the cost of these provisions could add over $900 billion to deficits over the next decade, according to the Congressional Budget Office,” Hoyer said.

The provisions are not included in the current law baseline on which tax bills are scored. Camp wrote that may members have spoken up in favor of making the extenders a permanent part of the baseline. Those changes could make tax cuts look less expensive.

The hearings are a part of a three-step process Camp spelled out in the memo. He said he plans to work in the coming weeks and months to “begin advancing permanent legislation through the committee that paves the way for tax reform by making incremental progress towards full reform.”

Camp has pledged that his tax reform proposal would retain the current revenue levels and distribution of the tax burden.

The committee took on a similar appraisal of the tax breaks in April 2012, allowing any House member to testify on behalf of their most treasured extenders. That effort was an attempt to wean out outdated provisions, but most of the witnesses talked up the benefits they thought should be preserved.

When the extenders were renewed retroactively in 2013, a Senate committee-passed bill was simply attached to fiscal cliff legislation, leaving the House effectively out of the debate